1. Deductibility of Mortgage Interest- While renting a home (assuming no business purposes are present) is not currently tax deductible, paying a mortgage has certain advantages. Mortgage interest is deductible in most circumstances when a taxpayer is eligible to itemize his/her deductions. Itemization may occur when the total itemized deductions exceed the "standard" deduction on one’s income tax return, and is reflected by completing and attaching schedule A to the return. Mortgage interest is a component of itemized deductions, and is typically the largest deduction. In most cases, a taxpayer paying a full year of mortgage interest has a substantial deduction that normally exceeds the standard deduction, and therefore can itemize and create a lower tax burden and decrease tax due, or increase a tax refund.

2. Deductibility of Real Estate Taxes- Real estate taxes are also fully deductible for a taxpayer itemizing his deductions on Schedule A of their 1040. Real estate taxes in Illinois need to be adjusted in the case of a first time home buyer, as taxes are paid in arrears in cook county, and typically there is no deduction in the first year of ownership, as the taxes are paid by the seller. However, this usually reverses in the year of sale, and an increased deduction of real estate taxes can be taken for taxes paid to the buyer. Real estate taxes should be taken into consideration when owning a home, however, the effect of the deduction will be mitigated by the resulting tax savings.

3. Rental property- Special rules apply toward the ownership of rental property. All expenses incurred in the ownership of property that is rented to a tenant can usually be deducted, or capitalized and depreciated over a period of time. Good planning could result in positive cash flow and tax benefits.

New 1997 Tax Law affecting property-

1. Capital Gains- Significant changes have been effectuated by the new tax law on the sale of a personal residence. The need of keeping detailed records for all capital improvements, while not eliminated and strongly recommended, are no longer absolutely necessary. The new tax law has eliminated capital gains for the first $500,000 of net profit earned on the sale of a residence. Net profit would be calculated by taking the cost of the home (or other basis), including improvements, and subtracting this from the selling price of the home (less certain closing costs). This profit would then most likely be reported, but completely excluded, from taxation. This benefit is substantial, considering that most home ownership investments are profitable. Under the new law, the investment in a home is one of the most profitable investments an individual can make, as all the profit earned on the sale would be tax free.

2. New laws affecting Retirement Plans- New laws concerning Retirement Accounts have been established, allowing for the borrowing and/or withdrawing of certain monies for the first time purchase of a new residence. These laws are complex and vary from situation to situation, and can be more fully explained by a CPA or tax professional, based upon your individual situation.